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Spending May Diminish, but Time Definitely Is Shrinking

After four marathon sessions and hundreds of amendments the House of Representatives approved of legislation, H.R. 1, which will cut spending in the final seven months of FY 2011. However, while the course the bill traveled in the House was precarious, the rest of the path it must travel is downright impassable. Meanwhile, time is dwindling for Washington to avert a government shutdown.

Congress must pass a new continuing resolution (CR) to keep the federal government operating before the current one expires on March 4. The new House majority seized this opportunity to make good on their campaign pledge to substantially reduce federal spending. The House passed H.R. 1 in the early hours of Saturday morning. It includes $61 billion in cuts below current funding levels and would reduce spending by $100 billion below the level President Obama requested in his FY 2011 budget proposal. But the package in its current form will not be enacted. The Democratic-controlled Senate shows no willingness to support cuts of this magnitude and President Obama has already said he would veto this package if it does somehow make it off Capitol Hill.

All of this is coming at the same time as the President's release of his FY 2012 budget, which offers some modest cuts and also includes a five-year discretionary spending freeze. Congress was not able to pass a comprehensive budget last year, which put us in our current dilemma of short term CRs. The House and Senate will have to begin work on the FY 2012 budget soon if they hope to avoid the fate of this year's budget.

First things first, though. Congress is running short on time to broker a deal that will cut spending for the rest of this year at a level acceptable in both chambers. The House CR reduces funding to a wide range of programs. The package passed by the House began with a preliminary list of cuts Appropriations Chairman Harold Rogers (R-KY) proposed two weeks ago. Under pressure from freshmen who argued that the cuts did not fulfill their campaign promise, the Appropriations Committee then added another round of significant cuts, bringing the total reductions to the goal of achieving $100 billion in savings from the President's proposed FY 2011 budget.

From there a rare open amendment process was employed to allow members to propose further cuts. The House considered over 580 amendments, with 67 of them passing, from both Democrats and Republicans. These new cuts reduced spending by an additional $620 million, most of which came from voting to eliminate the second engine for the F-35 Joint Strike Fighter ($450 million). Other amendments cut spending for the National Drug Intelligence Center, US Institute of Peace, National Endowment for the Arts, and others. Most of the amendments that passed involved blocking funding for specific initiatives, which will not reduce overall spending. The programs the House voted to block include health care reform implementation, EPA regulations, Planned Parenthood, rural broadband development, net neutrality regulation, military assistance to Chad, and others.

While the precise breakdown of the cuts in the legislation is not immediately available, it will look very similar to the cuts in the original bill before the amendments were passed. See a table of those cuts, broken down by Appropriations subcommittee, below:

Subcommittee

Funding Amount*

Change from 2010 Enacted*

% Change from 2010 Enacted

Change from President's FY 2011 Request*

% Change from President's FY 2011 Request

Agriculture

$18.1

-$5.2

-22%

-$5.0

-22%

Commerce, Justice, Science

$52.7

-$11.6

-18%

-$7.8

-13%

Defense

$516.2

+$8.1

+1.6%

-$14.9

-2.8%

Energy & Water

$29.9

-$3.6

-11%

-$5.4

-15%

Financial Services

$20.4

-$3.8

-16%

-$4.9

-19%

Homeland Security

$41.5

-$1.1

-2.5%

-$2.2

-5%

Interior

$27.8

-$4.4

-14%

-$4.5

-14%

Labor, HHS

$146.0

-$17.5

-11%

-$24.5

-14%

Legislative

$4.4

-$0.19

-4%

-$0.67

-13%

Military Constr./VA

$74.2

-$2.6

-3%

-$1.8

-2%

State & Foreign Op.

$44.9

-$3.8

-8%

-$11.7

-21%

Tran., HUD

$52.4

-$15.5

-23%

-$16.3

-24%

Total

$1,028.5

-$61.2

-5.6%

-$99.7

-8.8%

* Numbers in billions of dollars.

With this bill, members of the House can say they satisfied their pledge to slash government spending. However, to date all the focus has been on discretionary spending, which represents just 12% of the overall budget. This approach is insufficient to address our unsustainable debt projections. Hopefully both sides will be willing to make compromises to achieve a comprehensive fiscal plan that includes domestic discretionary and defense cuts, entitlement reform, and reforming the tax code.

The current political theater underscores the need for revamping the budget process and setting longer-term fiscal goals to put the country on a sustainable fiscal course, as opposed to the incremental approach Congress is currently undertaking. Late last year the Peterson-Pew Commission on Budget Reform offered a set of recommendations to overhaul the process and establish enforceable goals. We hope Congress can follow the example of the bipartisan group of senators who are working on a comprehensive approach and agree on a real fiscal plan.